Budgetary Limits for Nonprofit Lobbying

posted on Wed, Apr 2 2014 12:47 pm by Mid-States Region

The Network was recently contacted by a state public health association requesting information about budgetary limits for nonprofit lobbying. Because of their tax status, nonprofits such as 501(c)(3) organizations are limited in the types of lobbying activities in which they can engage. Lobbying is a form of advocacy and advocacy is not always lobbying. Non-lobbying forms of advocacy include educating voters about candidate positions, educating the public about broad social issues, encouraging people to register to vote, and litigating. A 501(c)(3) can engage in a limited amount of lobbying, which includes activities to influence federal, state or local legislation, as well supporting or opposing ballot measures. The Alliance for Justice’s advocacy website provides several resources about the various types of nonprofit organizations and lobbying limits for each kind.

To determine how much lobbying a 501(c)(3) can engage in, nonprofits first need to determine how they will measure their lobbying: with the insubstantial part test or the 501(h) expenditure test. The insubstantial part test is the default for nonprofits, where lobbying is not a substantial part of an organization’s overall activity. Many tax practitioners believe that if a nonprofit’s lobbying activity is five percent or less of its overall activities, it would meet the insubstantial part test.

The 501(h) expenditure test provides clear dollar-based limits on how much money a nonprofit can spend on lobbying. Depending on the amount an organization spends to accomplish its exempt purpose, it can generally spend up to 20 percent of its annual expenditures on lobbying. This test also contains clear definitions of what constitutes lobbying.